Canadian housing market - 2022: surprising trends

Canada's housing market continues to shake, with the Canadian Real Estate Association (CREA) saying Friday that sales in June were down 23.9% from a year earlier. The biggest four-month drop is in the most popular areas: Greater Toronto, Big Vancouver, Calgary, Edmonton and Hamilton-Burlington. Among the provinces, the palm is held by Ontario.

"Sales activity continues to decline amid rising interest rates and uncertainty," CREA Chairman Jill Udil said in a statement.

In this regard, there has been an entirely surprising trend for the usually red-hot housing market: the average Canadian real estate price has dropped 1.8% since last June to $655,850 CAD. This is especially striking now, after February hit record highs, with prices down 18% from February to June, that's more than $150,000 CAD in recalculated values.

As of June, the average price of real estate in Canada was $541,350 CAD (the figure does not include rates for the Greater Toronto Area and Vancouver, the two most expensive areas of the country).

For Toronto, the Regional Real Estate Board reported that sales for June were down an unthinkable 41.4% from a year ago, and the average price was $1,246,254 CAD, down $200,000 CAD from the February record.

In addition, another trend has emerged: so-called delisting. John Paschalis, president of a Toronto-based brokerage firm, talked about this phenomenon in his interview: in the current situation, sellers have begun to withdraw their properties en masse from sale.

He named 3 main instances when homeowners decide to remove their listing:

• some of them are excluded from the listing in order to re-evaluate and enter the market with a lower price;
• Others do not agree with the current pricing and decide to wait it out, staying in their homes;
• Others find themselves in the most difficult situation, when a new home is in the process of being purchased and the old one cannot be sold: then they have to give up the new deal and stay in their old home.

In some areas of Ontario, there are more homes taken off the market than sold: for example, in one suburb of Toronto, 10 properties have not been sold in the past 2 weeks.

Competition in the market has caused sellers to look for new ways to attract buyers: restoring homes, taking new photos and even offering higher commissions to real estate agents, Pasalis said.

However, their efforts could be completely overwhelmed by a rapid increase in inflation and an unpleasant surprise from the Bank of Canada - an unlikely key rate hike. The cost of living is rising, and high rates are burdening mortgage payments.

In this regard, financiers in Canada are united in their predictions about the housing market: it cracked already after the initial change in rates, and the 100 basis point increase made the situation colossally worse.

Randall Bartlett, one of Canada's most respected economists, says bluntly in a note for Desjardins, "With further rate hikes on the horizon, it's hard to expect relief for homeowners anytime soon."

It is worth noting that the difficulties faced by sellers of real estate may help those who want to buy it a little: Over the past 20 years, the average price of housing in Canada has risen by 375%, making it unaffordable for millions of citizens and residents. Even though June prices are still much higher than they were five years ago, the growing discounts and competition among sellers can be beneficial to buyers.